I have a case where the deceased’s will provides for their estate to be settled on discretionary trust for their spouse and issue and appoints the spouse and children as trustees.
The spouse has become mentally incapable and in the past I have always relied on S36 Trustee Act to remove an incapable trustee using a deed of retirement and appointment without obtaining permission of the Court of Protection.
I have always understood that this was an acceptable method, provided the incapable trustee did not have an interest in possession in the trust.
A senior colleague has cast doubt on this so I just wanted to check whether this is acceptable? ss9 of s36 specifically refers to an interest in possession but most of the authorities I check just refer to a “beneficial interest”.
On my understanding, a member of the class of beneficiaries of a discretionary trust does not have a beneficial interest unless the trustees exercise their discretion in favour of the beneficiary, which I presume has not been done in respect of the trustee who has lost capacity. The Cambridge English Dictionary defines beneficial interest as “ the right to receive income, profits, interest, et cetera from a business, contract or investment” and it goes on to say that it is “the right to live in or receive income from a property”. I would therefore disagree with your colleague.
Patrick Moroney
BWL Solicitors